A nephew of President Jacob Zuma, a grandson of Nelson Mandela and three others are liable for the cost of the destruction of mining assets they gained control of, Judge Eberhard Bertelsmann in the Pretoria High Court has found.
Khulubuse Zuma and Zondwa Mandela were among the directors of Aurora Empowerment Systems, and are personally liable for its failure, according to a ruling handed down by Bertelsmann.
Through Aurora, Zuma and Mandela gained control of the Pamodzi Gold Ltd. mines around Johannesburg in 2009 when its previous owner was placed under provisional liquidation. When Aurora failed to raise the required funds to get the mines up and running, they fell into disrepair and were ravaged by illegal miners. More than 5 000 employees lost their jobs and were left without pay.
Mandela and three colleagues – Thulani Ngubane, Solly Bhana and Fazel Bhana – fraudulently misrepresented Aurora’s ability to pay for the Pamodzi Gold Ltd. mines, the judge said. Zuma, while not involved in the bid process, showed “reckless disregard” for his role as Aurora’s chairperson in the ensuing chaos, he ruled.
“The entire project was and remained a pipe dream,” Bertelsmann said. “The respondents must have known from the first moment that they would wreak havoc in the miners’ lives through their actions yet they pressed ahead.”
As such, Mandela, Ngubane and the Bhanas are personally liable for claims proven by the liquidators, who ran the sale process and brought the case, the judge ruled.
The directors were “indisputably reckless”, Bertelsmann said. Assertions contained in Aurora’s bid documents for Pamodzi’s Orkney mine were a “figment of an overactive imagination”, he said.
The liquidators for the Pamodzi mines, who agreed to sell them to Aurora, accuse Zuma and Mandela of misrepresenting its finances during the sale and then of stripping the mines’ assets to sell for scrap. Pamodzi’s creditors will now start the process of preparing claims, John Walker, the liquidators’ lawyer, told reporters in Pretoria. The claims amount to about R1.7-billion, the liquidators said in court documents.
The workers “suffered a lot and now the privileged must suffer,” Gideon du Plessis, the general secretary of Solidarity, a union representing the mine’s employees, said after the ruling. “They will know how the workers feel when they also have nothing left in their houses.”
Mandela, Ngubane and the Bhanas are considering an appeal, Etienne van der Merwe, their lawyer, said outside the court. The liquidators’ claims of 1.7-billion rand are “vastly exaggerated” and must yet be proven in court, he said.
Zuma, who was chairperson of Aurora and said he didn’t have an executive or operational role in the business, is jointly liable for all losses incurred after December 1 2009, Bertelsmann said.
Zuma “has a strong basis for an appeal” given that the judge recognised he should be treated differently from the others, Vuyo Mkhize, his spokesperson, told reporters at the court. Zuma engaged in a genuine effort to ensure alternative funding, paying R35-million of his own money to try resolve Aurora’s problems, he said.
In court submissions, Mandela, Zuma and their fellow directors denied they were responsible for the mining venture’s failure, saying they never had full control of the assets.
Aurora agreed in 2009 to take over the mines from the insolvent estate of Pamodzi, which is controlled by liquidators including Johan Engelbrecht of Icon Insolvency Practitioners (Pty) Ltd.
The company said it would pay R605-million for the two operations and invest a further R350-million in them. Aurora never came up with the money, it is alleged in court documents.
Pamodzi’s liquidators, including Engelbrecht, brought the claims against Aurora’s directors, alleging they removed the mines’ assets and left the operations in an unworkable state. – Bloomberg